The Fed's confidence trick this week was, once again, the Keyser Soze gambit (via Beaudelaire)- "convincing the world of Yellen's hawkishness, when no such character trait exists." However, unlike the movies, stocks and FX markets have already seen through the con, leaving Fed Funds futures alone to believe the hype. As we noted previously, "The Fed Can't Raise Rates, But Must Pretend It Will," repeating its pre-meeting hawkishness to dovishness swing time and again in a "Groundhog Day" meets "Waiting For Godot"-like manner. Time is running out Janet, tick tock...
Americans are increasingly likely to respond positively to a placebo in a drug trial – more so than other nationalities. That’s the upshot of a recently published academic paper that looked at 84 clinical trials for pain medication done between 1990 and 2013. These findings, while bad for drug researchers, does shed some light on our favorite topic: behavioral finance. Trust and confidence makes placebos work, and those attributes also play a role in the societal effectiveness of central banks. That’s what makes the Fed’s eventual move to higher rates so difficult; even if zero interest rates are more placebo than actual medicine, markets believe they work to support asset prices.
Investors are aware that the market is manipulated... and it doesn’t seem to worry them. They don’t fight the Fed; they sit down at the table with it. They play the game. And so far, they have done well. But now... She will signal that, soon, the central bank will begin the long return to “normalcy.” Don’t believe it. The entire system depends on abnormality.
Bullish Fund Flows Return With A Vengeance: Largest Equity Inflow In 6 Weeks; Money Put Into Bonds, CommoditiesSubmitted by Tyler Durden on 10/30/2015 07:04 -0500
The bullish fund flows are back. This is how Bank of America summarizes the latest EPFR capital flow sentiment: "Loving Wall Street: $15bn equity inflows + $5bn HY/IG inflows + 6 straight weeks of commodity inflows = investors are "risk-on."
Back in September we explained why, contrary to both conventional wisdom and the BOJ's endless protests to the contrary, neither the BOJ nor the ECB have any interest in boosting QE at this - or any other point - simply because with every incremental bond they buy, the time when the two central banks run out of monetizable debt comes closer. Since then the ECB has jawboned that it may boost QE (but it has not done so), and overnight as reported previously, the BOJ likewise did not expand QE despite many, including Goldman Sachs, expecting it would do just that.
Where is the “hyperinflation”?
'Mysterious' JPY-Selling, Stock-Buying Panic Ensues After Bank Of Japan Leaves Monetary Policy UnchangedSubmitted by Tyler Durden on 10/29/2015 22:55 -0500
Having disappointed an expectant market by voting overwhelmingly (8-1) to leave monetary policy unchanged, the initial plunge in USDJPY and Japanese stocks has found a mysterious (and massive) JPY seller and Nikkei 225 buyer. USDJPY is now 100 pips and Nikkei 225 500 points above post-BOJ dip lows... because hawkish is the new bullish...
The Ghost Cities Finally Died: For China's Steel Industry "The Outlook Is The Worst Ever Amid Unprecedented Losses"Submitted by Tyler Durden on 10/29/2015 21:35 -0500
In late 2014 something happened: for whatever reason the most unregulated aspect of China's financial system, its shadow banks, not only stopped lending money but actually went into reverse, thus putting a lid on China's Total Social Financing expansion, which had been the world's "under the radar" growth dynamo for so many years. At that moment not only did China's ghost cities officially die, but it meant an imminent collapse for China's steel industry. That collapse has arrived.
World Health Organization: Prolonged Exposure to Even LOW Level Radiation Increases the Risk of CancerSubmitted by George Washington on 10/29/2015 20:01 -0500
Haruhiko Kuroda owns 52% of all Japanese ETFs. And now he wants more. Facing a lack of willing JGB sellers, the BoJ now faces the possibility that ramping up its easing efforts will entail expanding the bank's already elephantine equity portfolio. "At a fundamental level, I don’t support the idea of central banks buying ETFs or equities. Unlike bonds, equities never redeem. That means they will have to be sold at some point, which creates market risk."
A bursting of property bubbles in London and New York would be expected to have an impact on national economies and indeed on national property markets. Sentiment would be badly impacted. Caution should be the order of the day.
While China had previously hinted that it's one-child policy is being phased out, most notably in 2013 when sources close to the National Population and Family Planning Commission said China may relax its one-child policy at end-2013 or early-2014 (read end) by allowing families to have two children, moments ago, during the Fifth Chinese Plenum, this 37 year old policy was formally scrapped and China will henceforth allow two kids for all couples in what is a clear bid to boost growth.
Gold’s biggest enemy is a brilliant Nobel Prize winning economist, university professor and columnist for the New York Times. Sadly, he is also a con man.
The surge in the USDollar today after The FOMC's 'hawkish' statement has prompted strength in the Offshore Yuan, narrowing once again the spread to Onshore Yuan. Another CNY10 billion cash injection hasn't done much for Chinese stocks or liquidity markets however. After better than expected Japanese industrial production however USDJPY plunged (i.e. no imminent BoJ easing) and that dragged Nikkei 225 over 200 points lower (erasing all the FOMC gains).
NIRP Panic: Over Half Of European 2-Year Bonds Trade At Record Negative Yields; Italy Paid To Issue DebtSubmitted by Tyler Durden on 10/28/2015 11:53 -0500
Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe's government curve. As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!